Google braces for illegal drug ad fine

@CNNMoneyTech July 1, 2011: 8:32 AM ET
Google is under investigation for posting illegal ads for pharmaceutical drugs, including Oxycontin.

Google is under investigation for posting illegal ads for pharmaceutical drugs, including Oxycontin.

NEW YORK (CNN) -- Internet search operator Google is bracing for a fine that could top $500 million, after a federal probe of illegal online pharmacy ads placed on the website over the past three years.

Law enforcement sources told CNN that federal prosecutors in Rhode Island, along with undercover agents from the Food and Drug Administration, are heading a massive investigation aimed at Google (GOOG, Fortune 500). The prosecutors are trying to prove that Google knowingly took advertising money from websites selling highly addictive drugs without a legitimate prescription.

A spokesman for the U.S. Attorney's office in Providence told CNN he could "neither confirm nor deny" reports of the probe. Google declined comment "since this is a legal matter."

But in early May, Google filed a notice with the Securities and Exchange Commission saying it was setting aside $500 million to potentially resolve a case with the Department of Justice. In its filing, Google stated only that the matter involved "the use of Google advertising by certain advertisers."

If a fine of $500 million or higher is in fact imposed on Google, legal experts say it would be the largest such penalty in U.S. history.

A recent study by doctors at Massachusetts General Hospital and the University of Southern California showed a significant expansion in treatment for prescription drug abuse from 2000 to 2007. During those years, the study showed, emergency room admissions for prescription drug abuse rose from 100,000 to 200,000.

The study showed states with the greatest expansion of high-speed Web access also had the largest increase in admissions for treatment of prescription drug abuse.

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"There's all sorts of drugs one can purchase illegally over the Internet," one of the study's co-authors, Dr. Anupam Jena, told CNN. "So there's narcotics, like OxyContin and Percocet. And there's stimulant medications, sometimes used to treat ADHD -- attention deficit/hyperactivity disorder. There are also ... anti-anxiety medications like Ambien or Ativan that people routinely use for the correct indications, but sometimes can be abused."

State regulators and watchdog groups say they have been warning Google and other search engines for years that online pharmacies have been allowed to operate without adequate supervision.

Joseph Califano, the president and founder of Columbia University's National Center on Addiction and Substance Abuse, warned Google CEO Eric Schmidt of the problem in a 2008 letter. Califano, a former aide to President Lyndon Johnson and a Cabinet secretary under Jimmy Carter, told Schmidt that his research had found "prominent displays of ads for rogue internet pharmacies in a Google search for controlled drugs."

"This suggests that Google is profiting from advertisements for illegal sales of controlled prescription drugs online," Califano wrote. The company never responded, he said.

"I asked him, 'Please, you have to look at what's going on. Why are we having such an explosion of prescription drug abuse among teenagers and kids?'" said Califano. "Well, where do they get them?"

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Califano warned that illegal online pharmacies are a pipeline for children who want to obtain drugs. He said Google "can do something about this that nobody else can do."

In 2008, not long before Califano sent his letter to Google, CNN correspondent Drew Griffin was able to purchase the potentially addictive drug Percocet without seeing or talking to a doctor. He ordered the drug online and within a day, the pills were at the doorstep of his home, the prescription signed by a doctor in Tennessee he had never seen or met.

For Califano, a longtime Washington insider, the ease and availability of online drugs is "a crime."

"To me, it's an example of putting profits over people," he said. "That's what we're talking about here. And it's bad, really bad, because we're talking about kids." To top of page

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